Bayou Re Ltd. (Series 2024-1)

Louisiana Citizens Property Insurance Corporation, the non-profit residential and commercial property insurer for those who cannot access private market insurance in the state, is back in search of $225 million or more in fully-collateralized named storm reinsurance protection from the capital markets with this Bayou Re Ltd. Series 2024-1 catastrophe bond issuance.

The initial target is to secure $225 million of Louisiana named storm reinsurance protection for the residual market insurer of the state, Artemis has learned.

Two tranches of Series 2024-1 cat bond notes will be issued by Bayou Re Ltd. and sold to investors, with the proceeds used to collateralize the reinsurance agreement between the SPI issuer and Louisiana Citizens.

The reinsurance coverage from these Bayou Re 2024-1 cat bond notes will protect Louisiana Citizens against named storm losses on an indemnity trigger and per-occurrence basis, across a three-year term, we understand.

A currently $150 million Class A tranche of notes would attach their coverage at $1.33 billion of losses to Louisiana Citizens, exhausting at $2 billion.

As a result the Class A notes have an initial attachment probability of 1.47%, an initial expected loss of 1.14% and are being offered to investors with spread price guidance of 9.5% to 10.5%, we are told.

A currently $75 million Class B tranche are riskier, having an attachment point at $500 million of losses and exhausting their coverage at $800 million.

Which gives the Class B notes an initial attachment probability of 4.09%, an initial expected loss of 3.19% and they come with spread price guidance of 19% to 20%.

For comparison, the Series 2024-1 Class B notes will sit in the Louisiana Citizens reinsurance tower alongside the Series 2023-1 Class B notes from a year ago, which had an initial expected loss of 3.09% and priced for a spread of 19.5% at issuance.

Update 1:

Louisiana Citizens has raised its target for this new Bayou Re 2024-1 catastrophe bond, with up to $275 million of collateralized named storm reinsurance now sought across the two tranches of notes.

The Class A notes are now sized at between $150 million and $200 million, while their price guidance has dropped to a new range of 8.5% to 9.5%.

The Class B notes are still $75 million, while their price guidance has also dropped, to between 18.5% and 19%.

Update 2:

We understand that Louisiana Citizens Property Insurance Corporation secured its upsized target for $275 million of reinsurance from its latest Bayou Re 2024-1 catastrophe bond, while the notes were priced at the low-ends of guidance.

The Class A notes were finalised at $200 million in size, with a spread priced at 8.5%.

The Class B notes were finalised at $75 million, while their price was finalised to pay investors an 18.5% spread.